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Why Is NVR (NVR) Up 7.2% Since Last Earnings Report?

A month has gone by since the last earnings report for NVR (NVR). Shares have added about 7.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is NVR due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

NVR Q4 Earnings Beat, Homebuilding Revenues Lag, Orders Up 25%

NVR reported mixed fourth-quarter 2023 results, with earnings surpassing the Zacks Consensus Estimate and Homebuilding revenues missing the same. Both the top and bottom lines decreased on a year-over-year basis due to softened housing demand, given higher mortgage rates during the period.

Inside the Numbers

The company reported earnings of $121.56 per share, which topped the consensus mark of $118.63 by 2.9%. The reported figure decreased 9% from the prior-year quarter’s figure of $133.44 per share.
 
Total revenues (Homebuilding & Mortgage Banking fees combined) amounted to $2.43 billion for the reported quarter, reflecting a decline of 10% on a year-over-year basis.

Segment Details

Homebuilding: Revenues in the segment totaled $2.39 billion, down 11% from the year-ago quarter. The metric lagged the consensus estimate of $2.57 billion by 7.2%. Settlements in the quarter were down 7% year over year to 5,332 units. Our model predicted settlements to decline 0.2% year over year to 5,739 units. The average selling price, or ASP, was $447,600, down 4% year over year. Our estimate for the metric was $449,900.

Gross margin contracted 120 basis points year over year to 24.1%. Our estimate for the metric was 24.2%.

Given declining rates, new orders, net of cancelations, increased 25% from the prior-year quarter’s levels to 5,190 units. The average sales price of new orders dropped 2% from the prior-year quarter’s figure to $450,900. However, our model predicted the average sales price of new orders to decline 0.4% year over year to $457,200. The cancelation rate was 13% for the quarter, down from 18% a year ago.

On a unit basis, backlog at the end of Dec 31, 2023, improved 12% from the prior-year quarter’s figure to 10,229 homes and grew 10% on a dollar basis to $4.76 billion.

Average active communities were 438 during the quarter, up from 428 reported a year ago.

Mortgage Banking: Mortgage banking fees grew 3% year over year to $45.5 million. Mortgage closed loan production totaled $1.5 billion, down 2% year over year. The capture rate was 88% for the fourth quarter, up from 80% a year ago.

2023 Highlights

Earnings came in at $463.31 per share, reflecting a decrease from $491.82 reported a year ago. Homebuilding revenues were $9.31 billion, down from $10.33 billion in 2022. Total revenues were $9.52 billion, down 10% year over year. Settlements were 20,662 units, down 9%. Gross margin for the year decreased to 24.3% from 25.8% in 2022. Nonetheless, new orders grew 13% to 21,729 units for the year from 2022 level.

Financials

As of Dec 31, 2023, NVR had cash and cash equivalents for Homebuilding and Mortgage Banking of $3.13 billion and $36.4 million, respectively, compared with $2.5 billion and $19.4 million, respectively, at 2022-end.

During 2023, NVR repurchased 181,499 shares for $1.1 billion. At December 2023-end, the company had 3,194,876 shares outstanding.

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How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

The consensus estimate has shifted 20.21% due to these changes.

VGM Scores

At this time, NVR has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise NVR has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

NVR belongs to the Zacks Building Products - Home Builders industry. Another stock from the same industry, D.R. Horton (DHI), has gained 2.2% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.

D.R. Horton reported revenues of $7.73 billion in the last reported quarter, representing a year-over-year change of +6.5%. EPS of $2.82 for the same period compares with $2.76 a year ago.

For the current quarter, D.R. Horton is expected to post earnings of $3.09 per share, indicating a change of +13.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.2% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for D.R. Horton. Also, the stock has a VGM Score of B.

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D.R. Horton, Inc. (DHI) : Free Stock Analysis Report

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